Four-Day Rally Puts FTSE Flat in Second Quarter

The top tier's strongest rally in almost four months brought the second-quarter performance in flat overall as investor risk appetite returned

Holly Cook 30 June, 2011 | 6:18PM
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A final flurry of activity saw the FTSE 100's performance over the second quarter of 2011 come in flat, with the market 0.4% weaker over the first six months of the year. The UK’s benchmark index hit its best run in almost four months on Thursday, having steered clear of the red for four consecutive sessions, with optimism about an imminent solution—albeit temporary—to Greece’s default risk.

The FTSE 100 index took on 90 points to close 1.5% higher at 5,946, while the FTSE 250 index added 135 points or 1.1% to 11,934.

After passing the initial austerity bill yesterday, Greek lawmakers voted today to speed up the implementation of the spending cuts and tax increases. The vote was needed to secure the next tranche of bailout funds from the EU that will allow the country to avoid default for the time being. Separately, Germany's large banks agreed to take part of a voluntary programme to extend the maturities of around EUR2 billion in Greek debt that is currently set to mature in 2014.

Very few London-listed stocks failed to make headway Thursday, and Lloyds Banking Group (LLOY) was the stand-out performer, surging 9.7% to the top of the leaderboard. The part-nationalised bank announced its strategic review this morning and the market subsequently applauded new CEO Horta-Osorio’s stance, which includes the aim of cutting 15,000 jobs to save £1.5 billion the next four years while investing £2 billion in the retail business. These new job cuts will see the group named the bank that has slashed the most jobs out of any in the UK, but while Lloyds employees cursed their employer, shareholders rejoiced the prospect of a concrete plan to put the bank on the right foot.

Royal Bank of Scotland (RBS), the UK’s other partly-nationalised bank, also benefitted from the upbeat sector sentiment, as well as investors general return to risk assets. RBS shares added 4.6%, while Barclays (BARC) took on 2.9%.

Liquefied natural gas and oil producer BG Group (BG.) enjoyed a strong session, climbing 4.7% after doubling the amount it expects its Santos Basin offshore Brazil to produce to 8 billion barrels of oil equivalent.

Sticking with natural resources, with oil and gas prices both on the up today and bargain-hunters on the lookout for undervalued opportunities, other oil & gas producers and metal miners were also on the up. Vedanta Resources (VED), Anglo American (AAL) and Royal Dutch Shell (RDSB) took on 2.2%-3.1%.

But Petrofac (PFC) bucked the trend, falling 2.0% after the oil equipment group’s trading update was eclipsed by news CFO Keith Roberts is to retire, to be replaced by the former CFO of Cable & Wireless.

Also among the handful of casualties were a couple of those stocks that had outperformed during the previous session, which succumbed to profit-taking on Thursday, perhaps a sign of what the Friday session might entail after four days of broader market gains. ICAP (IAP) and ITV (ITV) lost 1.2% and 0.65, respectively Thursday.

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Holly Cook

Holly Cook  is Manager, Morningstar EMEA Websites

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